November 28, 2003



Big Feed Mills Led China's Feed Industry Steady Growth in 2003


Report on the Conference Held by China Feed Industry Association in Nanjing Recently


An eFeedLink Exclusive Report


China Feed Industry Association convened a conference during the time when China Animal Husbandry & Feed Industry Trade Fair 2003 was being held in Nanjing from November 17-19, to review and report on the overall performance of China's feed industry for the current year. It was attended by representatives and chairmen of its respective provincial/district feed industry associations.  The conference also discussed the industry's outlook and developmental focus of the China Feed Industry Association for the coming year.


Mr Bai Meiqing, Chairman of China Feed Industry Association, stated at the conference that 2003 has been an unusual and unprecedented year for China's feed industry.  The industry was first hit by the SARS epidemic during the initial half of the year and then by the drastic increase in prices of raw materials for feed production, like soymeal and lysine, during the latter half.  In many parts of China, prices of soymeal reached a high of more than RMB 3400 /ton, while lysine prices rose from a low level of slightly above RMB 10,000 /ton to more than RMB 50,000 /ton.  Despite their recent falls, prices of soymeal and lysine are currently still at historically high levels.


Notwithstanding the problems and difficulties encountered, China's feed industry reported positive and steady growth rates in 2003, especially in the production of premix feeds and feed additives, which show relatively higher rates of growth.  Size wise, large-scale enterprises outperformed smaller ones.


As of end September this year, a 6% year-on-year increase was seen in China's feed production, which totaled 66.7 million tons.  Of this, the production of complete feed (at 48.5 million tons), concentrated feed (at 15.8 million tons) and feed additives (at 2.4 million tons) grew by 3.6%, 2% and 4% respectively, compared to the same period last year.


For 2004, Mr Bai Meiqing maintained a positive outlook with possibility of further growth, for China's feed industry.  Based on official projection of continually strong economic growth for China next year, he indicated that there are good potentials for the expansion of domestic demand for livestock products.  This is because, with continual development of a generally progressing socio-economic structure in China, the people's general standard of living would improve, and which would in turn lead to an increase in demand for livestock products. This would thereby result in higher demand for Chinese feed products.


He added that with the continual restructuring of industrial sectors in developed countries, including their livestock industries, an increase in these countries' demand for China's livestock and feed products could be expected.  This would provide additional impetus for further growth of China's feed industry.


On challenges that may be unfavorable to the development of China's feed industry next year, Mr Bai Meiqing suggested the following three possibilities:   

  1. Following the liberalization of grain purchase prices and a drastic reduction in the volume of agricultural production in China this year, a strong rebound was seen in the prices of grains and crops, which had stayed at relatively low levels over the last 4-5 years.  Industry experts are of the view that current prices of grain and crops in China are at market recovery levels.   For next year, they expect prices of grains and crops to continue moving with minor fluctuations around current high price levels.

    While this year's inclement weather conditions might have negatively affected China's agricultural production, the fundamental reason for the year's drastic reduction in agricultural produce is the lack of motivation for farmers to produce more, due to the persistently low prices of grains and crops over the past years.  Another reason cited for the lower agricultural production this year is the significant reduction in sown acreage, as a result of deliberate land demarcation and reforestation policies.

    Consequently, China's ages of low grain prices are seen to be over.  So are the ages of low-cost raw materials for feed production;

  2. Decrease in demand for feed as a result of outbreak of poultry and livestock diseases;

  3. The implementation of trade protection and anti-dumping measures by foreign countries to prevent the entry of Chinese feed products into their markets. 

To deal with such challenges, Mr Bai Meiqing advised members of the industry to take cognizance of the guiding principles outlined by China's leaders at the 16th Party Congress.  He stressed the need for feed millers to develop new outlook and display greater creativity and coordination in dealing with challenges and problems faced by the feed industry.


To ensure further healthy development of China's feed industry, Mr Bai suggested that feed millers should focus their attention on the following recommendations:

  1. Feed millers should transform from their current duplication of low-standard industrial set-ups to a higher level of reproduction on an extended scale, with focus on qualitative improvement rather than on quantity alone.  After more than twenty years of development, there are now more than 13,000 enterprises in the feed industry.  With such a large number of enterprises, Chinese feed industry should move away from more duplication of low-standard industrial set-ups during the next phase of its development;

  2. Feed millers should move towards a more information-oriented system of industrial development;

  3. China's feed industry should adopt a more innovative path, one which is original and independent;

  4. Using stations and harbor ports as transportation hubs, the industry should develop a large-scale industrial processing zone with an integrated system of industrial linkages between the procurement and sales networks (termed as "one chain, two networks" by Mr Bai Meiqing);

  5. Feed millers should update and adopt modern enterprise and marketing management techniques and aim to set up sales management systems that are cost-effective, risk-averted, inflation-proof and value adding.